SAS Shares Jump on Report of Possible Lufthansa Investment

Scandinavian Airlines owner SAS AB advanced as much as 7.2 per cent following a report that Deutsche Lufthansa AG is in talks about buying a stake in the tri-national carrier.

SAS rose 1.7 kronor to 25.30 kronor, the biggest gain in two months, before closing 5.5 per cent higher at 24.90 kronor in Stockholm, where it is based. That takes the stock into positive territory for the year, with a 2 per cent increase, and gives the company a market value of 8.22 billion kronor ($1 billion).

Lufthansa, Europe’s third-biggest airline, has been in negotiations about a possible investment in SAS since the fall, Reuters reported Wednesday, citing people close to the German company it didn’t identify. Alternative options include a partnership or some other kind of cooperation, it said.

SAS returned to full-year profit in 2015, with pretax earnings of 1.17 billion kronor, aided by cost cuts and a sharper focus on business travel as it seeks to stem a loss of market share to discount carriers on short-haul routes and European and Persian Gulf network operators in the long-haul sector.

Reluctant Backers

The company is half-owned by the governments of Sweden, Norway and Denmark, which increased their commitment by buying stock to maintain their holdings after a capital increase that rescued the company in 2010.

All three have said they don’t intend to be long-term shareholders, with ministers talking about seeking an industrial partner that would allow them to cut their stakes since 2011.

Ann Wolgers, a spokeswoman for Swedish Enterprise Minister Mikael Damberg, said in response to Bloomberg questions that “we don’t comment on rumors about our companies and particularly not when it’s about a listed company.” The Danish Finance and Norwegian Industry ministries also wouldn’t comment.

Sweden’s Social Democrats, who formed a government with the Green Party last year, said before the election that they might seek to sell the state’s 21.4 percent holding. Denmark and Norway each have 14.3 percent stakes, according to the SAS website.

M&A-Averse

Lufthansa said it and SAS are in “constant talks” as long-time partners through the Star Alliance, of which they were founding members in 1997. “Anything further is pure speculation,” spokesman Helmut Tolksdorf said by phone.

The German company’s former Chief Executive Officer Christoph Franz turned away from acquisitions, which in the past had included the main Swiss, Austrian and Belgian carriers, saying Lufthansa’s focus should be on improving its own operations. He left in 2014.

Reuters said that one option for SAS might be to combine it with the growing Eurowings operation through which Lufthansa is seeking to slash costs, mainly on short-haul flights away from the carrier’s Frankfurt and Munich hubs.

Current CEO Carsten Spohr said last September that Lufthansa was looking at acquiring the 55 percent stake in Brussels Airlines NV that it doesn’t already own, indicating that acquisitions might be back on the agenda.